One of the pathological hallmarks of Alzheimer's disease is the cerebral deposition of beta-amyloid peptides (Abeta), generated by sequential proteolysis of amyloid precursor protein (APP) by BACE1 and gamma-secretase. There has been considerable epidemiological interest in the relationship between cholesterol and susceptibility to Alzheimer's disease. Evidence from a variety of in vitro and in vivo studies indicates that specialized detergent-insoluble membrane (DIM) microdomains, termed lipid rafts, which are rich in cholesterol and sphingolipids, might be a critical link between cellular cholesterol levels and amyloidogenic processing of APP. Indeed, BACE1 is modified by S-palmitoylation and targeted to lipid rafts. Recently, we reported that each of the gamma-secretase subunits and APP C-terminal fragments (CTF) are enriched in DIM isolated from brain and cultured cells. The mechanisms that regulate recruitment of gamma-secretase and APP into raft microdomains remains to be determined. Moreover, the significance of amyloidogneic processing in raft vs. non-raft environment has not been investigated. Finally, it remains unclear whether familial Alzheimer's disease-linked mutations in APP, PS1, and PS2 modulate Abeta42 production by affecting their localization and processing of APP in lipid rafts. Studies outlined in this proposal address the functional implication of co-residence of BACE1, y-secretase, and APP CTF in specialized cholesterol-rich membrane microdomains. Specifically, we propose to investigate the mechanisms regulating the recruitment of gamma-secretase, APP, and APP CTFs to lipid rafts, and elucidate the functional significance of rafts in amyloidogenic processing of APP. Recently, we identified post-translational S-palmitoylation at a single Cysteine residue in nicastrin and at three Cysteine residues in APH-1. It is known that palmitoylated proteins are preferentially targeted to lipid rafts. Here, we outline our strategy to investigate functional role of intrinsic raft-targeting signals in subunits of the gamma-secretase, and explore gamma-secretase function in raft and non-raft environment. We also propose to identify structural and sequence determinants that target APP and APP CTFs to rafts, and characterize how raft lipid components modulate residence and trafficking of gamma-secretase and APP, and influence amyloidogenic processing. The following are the Specific Aims of this investigation. Aim 1: To study the mechanisms underlying association and function of gamma-secretase in lipid rafts. Aim 2: To investigate the mechanisms underlying the association of APP with lipid raft microdomains. Aim 3: To investigate lipid raft regulation of PS1 and APP trafficking, and amyloidogenic processing. Our studies will uncover significant insights on gamma-secretase biology and amyloidogenic processing of APP that will be invaluable for the development of novel therapeutic strategies aimed at selective inactivation of gamma-secretase function in APP processing, in an attempt to reduce Abeta burden.